Rule 4 Cenvat Credit Rules 2004 – Conditions for allowing CENVAT credit.

By | May 11, 2017
(Last Updated On: May 11, 2017)

Rule 4 Cenvat Credit Rules 2004

Conditions for allowing CENVAT credit.

4 . (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service 54a[or in the premises of the job worker, in case goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be]:

55[Provided that in respect of final products, namely, articles of 56[jewellery or other articles of precious metals falling under heading 7113 or 7114 as the case may be] of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker :]

57[Provided further that the CENVAT credit in respect of inputs may be taken by the provider of output service when the inputs are delivered to such provider, subject to maintenance of documentary evidence of delivery and location of the inputs:]

57a[Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after 57b[one year] of the date of issue of any of the documents specified in sub-rule (1) of rule 9.]

(2)(a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service 58[or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory,] 58a[or in the premises of the job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be,] at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year:

Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year:

59[Provided further that the CENVAT credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, 60[***] in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer:]

61[Provided also that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year :

62[Provided also that the CENVAT credit in respect of capital goods may be taken by the provider of output service when the capital goods are delivered to such provider, subject to maintenance of documentary evidence of delivery and location of the capital goods.]

62a [Explanation.—For the removal of doubts, it is hereby clarified that—

62aa [ (i) an assessee engaged in the manufacture of articles of jewellery or parts of articles of jewellery or both, falling under heading 7113 of the First Schedule of the Excise Tariff Act, shall be eligible, if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year, computed in the manner specified in the said notification, did not exceed rupees fifteen crore; ]
(ii) an assessee, other than (a) above, shall be eligible, if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year, computed in the manner specified in the said notification, did not exceed rupees four hundred lakhs.]

(b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under 62b[heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act, are in the possession of the manufacturer of final products, or provider of output service in such subsequent years.

Illustration.—A manufacturer received machinery on the 16th day of April, 2002 in his factory. CENVAT of two lakh rupees is paid on this machinery. The manufacturer can take credit upto a maximum of one lakh rupees in the financial year 2002-03, and the balance in subsequent years.

(3) The CENVAT credit in respect of the capital goods shall be allowed to a manufacturer, provider of output service even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company.

(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer or provider of output service claims as depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961).

(5) 63[(a) (i) The CENVAT credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker and from there subsequently sent to another job worker and likewise, for further processing, testing, repairing, re-conditioning or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or the provider of output service taking the CENVAT credit that the inputs or the products produced therefrom are received back by the manufacturer or the provider of output service, as the case may be, within one hundred and eighty days of their being sent from the factory or premises of the provider of output service, as the case may be:

Provided that credit shall also be allowed even if any inputs are directly sent to a job worker without their being first brought to the premises of the manufacturer or the provider of output service, as the case may be, and in such a case, the period of one hundred and eighty days shall be counted from the date of receipt of the inputs by the job worker;

(ii) the CENVAT credit on capital goods shall be allowed even if any capital goods as such are sent to a job worker for further processing, testing, repair, re-conditioning or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or the provider of output service taking the CENVAT credit that the capital goods are received back by the manufacturer or the provider of output service, as the case may be, within two years of their being so sent:

Provided that credit shall be allowed even if any capital goods are directly sent to a job worker without their being first brought to the premises of the manufacturer or the provider of output service, as the case may be, and in such a case, the period of two years shall be counted from the date of receipt of the capital goods by the job worker;

(iii) if the inputs or capital goods, as the case may be, are not received back within the time specified under sub-clause (i) or (ii), as the case may be, by the manufacturer or the provider of output service, the manufacturer or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods, as the case may be, by debiting the CENVAT credit or otherwise, but the manufacturer or the provider of output service may take the CENVAT credit again when the inputs or capital goods, as the case may be, are received back in the factory or in the premises of the provider of output service.]

64 [ (b) The CENVAT credit shall also be allowed to a manufacturer of final products in respect of jigs, fixtures, moulds and dies or tools falling under Chapter 82 of the First Schedule to the Excise Tariff Act, sent by such manufacturer to,—

(i) another manufacturer for the production of goods; or
(ii) a job worker for the production of goods on his behalf,

according to his specifications:

Provided that such credit shall also be allowed where jigs, fixtures, moulds and dies or tools falling under Chapter 82 of the First Schedule to the Excise Tariff Act, are sent by the manufacturer of final products to the premises of another manufacturer or job worker without bringing these to his own premises. ]

(6) The 65[Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be,] having jurisdiction over the factory of the manufacturer of the final products who has sent the input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be 65a[valid for three financial years], in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job-worker.

66[(7) The CENVAT credit in respect of input service shall be allowed, on or after the day on which the invoice, bill or, as the case may be, challan referred to in rule 9 is received:

66a[Provided that in respect of input service where whole or part of the service tax is liable to be paid by the recipient of service, credit of service tax payable by the service recipient shall be allowed after such service tax is paid:

Provided further that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9 is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service, except an amount equal to the CENVAT credit of the tax that is paid by the manufacturer or the service provider as recipient of service, and in case the said payment is made, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules]:

66aa [Provided also that in respect of services provided or agreed to be provided by a person located in non-taxable territory to a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India where service tax is paid by the manufacturer or the provider of output service being importer of goods as the person liable for paying service tax for the said taxable services, credit of service tax paid by the person liable for paying service tax shall be allowed after such service tax is paid: ]

Provided also that if any payment or part thereof, made towards an input service is refunded or a credit note is received by the manufacturer or the service provider who has taken credit on such input service, he shall pay an amount equal to the CENVAT credit availed in respect of the amount so refunded or credited:

Provided also that CENVAT credit in respect of an invoice, bill or, as the case may be, challan referred to in rule 9, issued before the 1st day of April, 2011 shall be allowed, on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9 :

66b[Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after 66c[one year] of the date of issue of any of the documents specified in sub-rule (1) of rule 9 67[except in case of services provided by Government, local authority or any other person, by way of assignment of right to use any natural resource]]

68 [Provided also that CENVAT Credit of Service Tax paid in a financial year, on the one time charges payable in full upfront or in instalments, for the service of assignment of the right to use any natural resource by the Government, local authority or any other person, shall be spread evenly over a period of three years:

Provided also that where the manufacturer of goods or provider of output service, as the case may be, further assigns such right assigned to him by the Government or any other person, in any financial year, to another person against consideration, such amount of balance CENVAT credit as does not exceed the service tax payable on the consideration charged by him for such further assignment, shall be allowed in the same financial year.]

Explanation I.—The amount mentioned in this 69[rule], unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March.

Explanation II.—If the manufacturer of goods or the provider of output service fails to pay the amount payable under this 70[rule], it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.

Explanation III.—In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, “following month” and “month of March” occurring in sub-rule (7) shall be read respectively as “following quarter” and “quarter ending with the month of March”.

56. Substituted for “jewellery falling under heading 7113” by Notification No. 9/2011-C.E. (N.T.), dated 24-3-2011, w.e.f. 24-3-2011.
57. Inserted by Notification No. 18/2012-C.E.(N.T.), dated 17-3-2012, w.e.f. 1-4-2012.
57a. Inserted by Notification No. 21/2014-C.E.(N.T.), dated 11-7-2014, w.e.f. 1-9-2014.
57b. Substituted for “six months” by Notification No. 6/2015-C.E.(N.T.), dated 1-3-2015, w.e.f. 1-3-2015
58. Inserted by Notification No. 3/2011-C.E.(N.T.), dated 1-3-2011, w.e.f. 1-4-2011.
58a. Inserted by Notification No. 6/2015-C.E.(N.T.), dated 1-3-2015, w.e.f. 1-3-2015.
59. Inserted by Notification No. 13/2005-C.E.(N.T.), dated 1-3-2005, w.e.f. 1-3-2005.
60. Words “as amended by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, the force of law, ” omitted by Notification No. 22/2005-C.E.(N.T.), dated 13-5-2005, w.e.f. 13-5-2005.
61. Inserted by Notification No. 6/2010-C.E.(N.T.), dated 27-2-2010, w.e.f. 1-4-2010.
62. Inserted by Notification No. 18/2012-C.E.(N.T.), dated 17-3-2012, w.e.f. 1-4-2012.

62a. Substituted by the CENVAT Credit (Third Amendment) Rules, 2016, w.e.f. 1-3-2016. Prior to its substitution, Explanation read as under :

Explanation.—For the removal of doubts, it is hereby clarified that an assessee shall be “eligible” if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs.

62aa. Item (i) substituted by the Cenvat Credit (Eighth Amendment) Rules, 2016, w.e.f. 26-7-2016.

62b. Substituted for “heading No. 68.02 and sub-heading No. 6801.10” by Notification No. 7/2007-C.E.(N.T.), dated 21-2-2007, w.e.f. 21-2-2007.

63. Substituted by Notification No. 6/2015-C.E.(N.T.), dated 1-3-2015, w.e.f. 1-3-2015. Prior to its substitution, clause (a), as amended by Notification No. 27/2005-C.E.(N.T.), dated 16-5-2005, w.e.f. 16-5-2005, read as under :

“(a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service.”

64. Substituted by the CENVAT Credit (Third Amendment) Rules, 2016, w.e.f. 1-4-2016. Prior to its substitution, clause (b), as substituted by Notification No. 6/2010-C.E.(N.T.), dated 27-2-2010, w.e.f. 27-2-2010, read as under :

“(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a manufacturer of final products to,-

(i) another manufacturer for the production of goods; or
(ii) a job worker for the production of goods on his behalf,

according to his specifications.”

65. Substituted for “Commissioner of Central Excise” by Notification No. 27/2005-C.E.(N.T.), dated 16-5-2005, w.e.f. 16-5-2005.

65a. Substituted for “valid for a financial year” by the CENVAT Credit (Third Amendment) Rules, 2016, w.e.f. 1-4-2016.

66. Substituted by Notification No. 13/2011-C.E.(N.T.), dated 31-3-2011, w.e.f. 1-4-2011. Prior to its substitution, sub-rule (7), as amended by Notification No. 3/2011-C.E.(N.T.), dated 1-3-2011, w.e.f. 1-4-2011, read as under :

‘(7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9 :

Provided that if any payment or part thereof, made towards an input service is returned, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount proportionate to the CENVAT credit availed in respect of the amount so returned.

Explanation I.—The amount mentioned in this sub-rule, unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March.

Explanation II.—If the manufacturer of goods or the provider of output service fails to pay the amount payable under this sub-rule, it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken.

Explanation III.—In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnership firm, the expressions, “following month” and “month of March” occurring in sub-rule (7) shall be read respectively as “following quarter” and “quarter ending with the month of March”.’

66a. Substituted by Notification No. 6/2015-C.E.(N.T.), dated 1-3-2015, w.e.f. 1-4-2015. Prior to their substitution, first, second and third provisos, as substituted by Notification No. 21/2014-C.E.(N.T.), dated 11-7-2014, w.e.f. 11-7-2014, read as under :

Provided that in respect of input service where whole of the service tax is liable to be paid by the recipient of service, credit shall be allowed after the service tax is paid :

Provided further that in respect of an input service, where the service recipient is liable to pay a part of service tax and the service provider is liable to pay the remaining part, the CENVAT credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9 :

Provided also that in case the payment of the value of input service and the service tax paid or payable as indicated in the invoice, bill or, as the case may be, challan referred to in rule 9, except in respect of input service where the whole of the service tax is liable to be paid by the recipient of service, is not made within three months of the date of the invoice, bill or, as the case may be, challan, the manufacturer or the service provider who has taken credit on such input service, shall pay an amount equal to the CENVAT credit availed on such input service and in case the said payment is made, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules”

66aa. Third proviso inserted by the CENVAT Credit (Second Amendment) Rules, 2017, w.e.f. 23-4-2017.

66b. Inserted by Notification No. 21/2014-C.E.(N.T.), dated 11-7-2014, w.e.f. 1-9-2014.

66c. Substituted for “six months” by Notification No. 6/2015-C.E.(N.T.), dated 1-3-2015, w.e.f. 1-3-2015.

67. Inserted by Notification No.24/2016-C.E. (N.T.), dated 13-4-2016, w.e.f. 13-4-2016

68. Sixth, seventh and eighth provisos substituted by Notification No.24/2016-C.E. (N.T.), dated 13-4-2016, w.e.f. 13-4-2016.

69. Substituted for “sub-rule” by Notification No.6/2015-C.E. (N.T.), dated 1-3-2015, w.e.f. 1-3-2015.

70. Substituted for “sub-rule” by Notification No.6/2015-C.E. (N.T.), dated 1-3-2015, w.e.f. 1-3-2015.

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